Dowdy v. Jordan, 47706

• Decision Date: 15 February 1973
• Docket Number: No. 3,No. 47706,47706,3
• Citation: 128 Ga.App. 200,196 S.E.2d 160
• Parties: , 69 A.L.R.3d 1188 J. R. DOWDY v. Emory C. JORDAN
• Court: Georgia Court of Appeals

Page 160

196 S.E.2d 160

128 Ga.App. 200, 69 A.L.R.3d 1188

J. R. DOWDY v. Emory C. JORDAN.

No. 47706.

Court of Appeals of Georgia, Division No. 3.

Feb. 15, 1973.

Syllabus by the Court

1. A guardian occupies a conflict-of-interest position and is in violation of his fiduciary duty of loyalty where he, in an individual capacity, is a joint tenant with right of survivorship with his ward with respect to funds deposited by his ward in savings accounts in Federal savings and loan associations, particularly where he exhausts other assets of the estate and preserves the value of the joint accounts which he pays to himself personally upon the death of the ward. In these circumstances he is accountable to the executor of the ward's estate for the sums so paid to himself, and is not entitled to discharge from the guardianship without refunding the sums to the trust estate.

2. Under the circumstances here, the court of ordinary entered a special order, within the meaning of Code § 49-231, exonerating the guardian from blame for failure to file annual returns for certain years and allowing commissions on transactions which occurred in those years.

3. Under Code Ann. § 49-241, a guardian is authorized, without obtaining a judgment of the court of ordinary, to provide for the estate of his ward competent legal counsel, according to the needs of the ward he represents.

In July, 1963, Nora Frances Jordan was in her mid-eighties and was a full-time patient in the DeKalb Convalescent Home. She had funds in two savings accounts, one at First Federal Savings and Loan Association of Atlanta, and one at Decatur Federal Savings and Loan Association. Her nephew, Emory C. Jordan, was familiar with her affairs, and Mrs. Jordan executed the appropriate application cards, brought to her at the nursing home by Mr. Jordan, to transfer the accounts to herself and Mr. Jordan as joint tenants with right of survivorship so that Mr. Jordan could obtain her funds for her as she needed them.

Some six months later Mrs. Jordan's health had deteriorated further, and upon the application of Louise Jordan White, a niece, she was adjudged mentally incompetent and in need of a guardian. Mr. Jordan, knowing that he was joint tenant with right of survivorship as to the savings accounts, filed his application for letters of guardianship of the person and property of Mrs. Jordan, and he was duly appointed on January 6, 1964. Thereafter Mr. Jordan, hereinafter called guardian, filed an inventory of his ward's estate which showed assets of $30,060.95. These consisted of a bank account; U.S. Government bonds; a second mortgage; an open account; and a house, lot and furniture. Also included in the inventory of assets was the account at First Federal of Atlanta in the amount of $8,098.18, and the account at Decatur Federal in the amount of $8,312.64. The guardian did not withdraw these funds and place them in a guardianship account, but left the form of the accounts intact with the result that he, in an individual capacity, was joint tenant with his ward with right of survivorship under Code Ann. § 16-431.

Annual guardianship returns were filed for 1964 and 1965. However, the ward died testate October 26, 1966 at age 88, her estate fell into litigation, ¹ and no further returns were filed. In 1971 J. R. Dowdy, as executor or co-executor ² of the decedent's estate, filed a petition in the court of ordinary, praying, inter alia, that the guardian be required to file a final return and deliver possession of the estate to the executor. At the direction of the court, the final return was filed on August 6, 1971, which revealed that on October 31, 1966, five days after his ward's death, the guardian had withdrawn the balance of $5,098.18 from the First Federal account, and $8,553.97 from the Decatur Federal account, or a total of $13,652.15, and paid this sum to himself individually as joint tenant with right of survivorship. From the three returns combined it was established that except for $60.57 paid over to the executors, all proceeds from cashing the government bonds, the payment of the second mortgage, and the bank account, as well as income from social security and rental of the house, and some of the income from the savings and loan accounts, had been expended, a total of some $13,650. In comparison to these expenditures from other sources, only $4,000 had been withdrawn from the joint savings accounts and expended on the ward's behalf, even though the ordinary had entered an order allowing encroachment upon the corpus of the estate. After the guardian had paid the $13,652.15 balance to himself from the joint savings accounts, and paid the $60.57 checking account balance to the executors, the only assets remaining were the open account in the amount of $610, and the house, lot and furniture with an estimated value of $7,000, although the house had fallen into a bad state of disrepair and had been condemned as unrentable.

Simultaneously with the filing of the final return, the guardian filed a petition for letters of dismission and discharge from his trust under the guardianship. Dowdy, the co-executor, filed his 'objection to discharge of guardian and petition for accounting,' alleging, inter alia, that the final return showed that the guardian took the $13,652.15 from the estate of his ward for his own use and benefit, and 'that the aforesaid taking of the $13,652.15 of his ward's estate by the guardian is improper, unlawful and demonstrates a direct conflict of interest between the guardian and the ward and is a breach of trust on the part of said guardian.' It was prayed, inter alia, that the guardian be required to fully account for all assets belonging to the trust estate, and that he be ordered to restore to the guardianship estate 'all those monies unlawfully paid to himself personally.'

The guardian filed his response, and at the hearing the co-executor insisted 'that this guardian had an interest contrary to the interest of the estate, he had a personal interest in this estate, so long as he could keep the accounts, these two Federal Savings and Loan accounts on which he was a joint payee or joint owner, as long as he could keep the balance high, he knew that at the time she died he would have a claim to the money, and for this reason, he utilized all of the other income in the estate to pay her bills and only withdrew a very minimum from these two accounts, not for her interest, but for his own interest so that when she died, he would be able to take the bulk of the estate,' and that 'there was a conflict of interest in here and he preserved the saving account.'

The ordinary entered an order approving the final return of the guardian as filed and dismissing the objection to discharge and petition for accounting. The co-executor appealed to the superior court and moved for summary judgment, praying that the judgment of the court of ordinary be reversed and that the guardian be required to refund to the trust estate 'all those moneys unlawfully taken by him from said estate.' The parties stipulated that the record from the court of ordinary, including the transcript of testimony from the hearing, represented the uncontroverted facts in the case, and submitted it to the court for determination without the intervention of a jury. The superior court denied the motion for summary judgment and affirmed the order of the court of ordinary, holding that there had been no violation of guardianship obligations. This appeal with a certificate for immediate review followed.

David H. Fink, Atlanta, for appellant.

Cobb, Cobb, Penland & Bridges, Chandler Raymond Bridges, Decatur, for appellee.

EBERHARDT, Presiding Judge.

1. 'The law will not permit a guardian to act in such way that his own personal interest may come in conflict with the interest of his ward with respect to the estate

of the latter in his charge. Code §§ 38-117, 49-205; Clark v. Clark, 167 Ga. 1(1a), 144 S.E. 787; Wright v. Thompson, 190 Ga. 173(2), 8 S.E.2d 640; Parnelle v. Cavanaugh, 191 Ga. 464, 465(2), 12 S.E.2d 877; Gammage v. Perry, 29 Ga.App. 427(2), 116 S.E. 126.' Allen v. Wade, 203 Ga. 753(1), 48 S.E.2d 538. A guardian or other trustee 'must act, not only for the benefit of the trust estate, but also in such a way as not to gain any advantage, directly or indirectly, except such as the law specifically gives him; and he owes an undivided duty to the beneficiary, and must not place himself in a position where his personal interest will conflict with the interest of the beneficiary . . .. The purpose of this rule is to require a trustee to maintain a position where his every act is above suspicion, and the trust estate, and it alone, can receive, not only his best services, but his unbiased and uninfluenced judgment. Whenever he acts otherwise, or when he has placed himself in a position that his personal interest has or may come in conflict with his duties as trustee, or the interests of the beneficiaries whom he represents, a court of equity never hesitates to remove him. In such circumstances the court does not stop to inquire whether the transactions complained of were fair or unfair; the inquiry stops when such relation is disclosed.' Clark v. Clark, 167 Ga. 1, 5, 144 S.E. 787. 'One of the most fundamental demental duties of the trustee is that he must display throughout the administration of the trust complete loyalty to the interests of the cestui que trust, and must exclude all selfish interest and all consideration of the welfare of third persons. . . . Reasons behind the establishment of the loyalty rule by equity are that it is generally, if not always, humanly impossible for the same person to act fairly in two capacities and on behalf of two interests in the same transaction. Consciously or unconsciously he will favor one side as against the other, where there is or may be a conflict of interest. If one of the interests involved is that of the trustee...